Raising debt by taking advantage of one’s own assets, even fully amortized, is made possible by a fiducie. It allows to secure financing unprovided by banks with reduced tax frictions.
- becomes the owner of the assets and secures lenders,
- allocates (when applicable) income generated by the assets between borrowers and creditors,
- returns assets to the settlors after full repayment of the debt,
- all the above transacting in a tax-neutral manner.
Protection of the lender
- Strength of the collateral trust, especially in the case of insolvency proceedings, owing to a convention de mise a disposition generating revenues allocated to the payment of the debt.
- Control of the assets and of their value through time.
- Protective LTV based on the quality of the assets and its cash flow generation.
Convenience for the borrower
- Retains the use of the property, including its availability for a potential sale (subject to the agreement from the lender)
- Accesses a new class of lenders, shouldering on the robustness of the fiducie, and secure financing that banks would have normally shunned.
- Avoids negative tax implications found in other asset-backed financings (e.g. sale & lease-back)
- Maintains accounting and tax treatment associated with the asset : depreciation & amortization, time allowance on capital gain, revenues,…
- Predefines, in agreement with the lender and the trustee, terms and conditions of the sale of the asset in case of default: price, time frame, buyers, exclusions…
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